The full-year results for Zhongsheng Group Holdings Limited (HKG:881) were released last week, making it a good time to revisit its performance. It looks like the results were a bit of a negative overall. While revenues of CN¥179b were in line with analyst predictions, statutory earnings were less than expected, missing estimates by 4.3% to hit CN¥2.08 per share. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
Taking into account the latest results, the most recent consensus for Zhongsheng Group Holdings from 17 analysts is for revenues of CN¥183.9b in 2024. If met, it would imply a credible 2.5% increase on its revenue over the past 12 months. Statutory earnings per share are predicted to rise 5.6% to CN¥2.22. In the lead-up to this report, the analysts had been modelling revenues of CN¥180.9b and earnings per share (EPS) of CN¥2.40 in 2024. The analysts seem to have become a little more negative on the business after the latest results, given the small dip in their earnings per share numbers for next year.
The average price target fell 6.4% to HK$21.04, with reduced earnings forecasts clearly tied to a lower valuation estimate. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Zhongsheng Group Holdings at HK$35.44 per share, while the most bearish prices it at HK$9.96. We would probably assign less value to the analyst forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. As a result it might not be a great idea to make decisions based on the consensus price target, which is after all just an average of this wide range of estimates.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We would highlight that Zhongsheng Group Holdings' revenue growth is expected to slow, with the forecast 2.5% annualised growth rate until the end of 2024 being well below the historical 11% p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 10% per year. Factoring in the forecast slowdown in growth, it seems obvious that Zhongsheng Group Holdings is also expected to grow slower than other industry participants.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting that it's tracking in line with expectations. Although our data does suggest that Zhongsheng Group Holdings' revenue is expected to perform worse than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Zhongsheng Group Holdings going out to 2026, and you can see them free on our platform here.
It is also worth noting that we have found 1 warning sign for Zhongsheng Group Holdings that you need to take into consideration.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.